Nokia's improving Lumia shipments came to a halt during the fourth quarter, bad news for Microsoft, which will soon take over the phone unit.

The Finnish company reported fourth-quarter sales of a!3.48 billion (US$4.75 billion), down 21 percent year-on-year, and a net loss of a!615 million, down from a!3.1 billion a year earlier.(

Having won shareholder approval of the pending sale of its Devices & Services business to Microsoft last November, Nokia isn't including that part of the company in its total numbers, instead reporting that business as discontinued operations in its fourth quarter.

Revenue for the Devices & Services business was a!2.6 billion, down 29 percent year on year.

For the first time, the company also didn't break out how many phones it sold, including its range of Windows Phone-based Lumia products. It did say that it shipped fewer phones overall, year-on-year, but that smartphone sales increased. From the third to the fourth quarter, however, the reverse was true: it sold fewer smartphones, but more phones overall.

The fourth quarter is traditionally a strong one for phone vendors, because of the holiday shopping season, so the smartphone sales drop is disappointing and bad news for Nokia and Microsoft, according to Francisco Jeronimo, research director for European mobile devices at IDC. Before the fourth quarter, Lumia volumes had continually increased last year.

The deal with Microsoft is expected to close before the end of March. Once Microsoft has taken control, it has many decisions to make, including brand alignment, how the devices business should be structured within Microsoft, and the level of autonomy it should have, Geoff Blaber, CCS Insight's vice president of research for the Americas, previously said.

Now it also has to add a way to increase smartphone shipments, if it wants Windows Phone to survive.